Money Buzz 3/04
A drop in 401(k) enrollment, micro-payments and more
Beta on It
If the last time you thought about the second letter of the Greek alphabet was in college, it's time to get reacquainted. Today, a beta coefficient can measure volatility when building an investment portfolio.
A beta is calculated by comparing historic fluctuations of the value of a stock or fund to the movement of the market as a whole. The resulting beta coefficient indicates how closely the stock or fund performance tracks that of the overall market. To use betas in navigating market swings, optimistic investors would seek high beta stocks likely to soar in a rally, while those more interested in guarding against a downturn would opt for low beta investments less likely to swing with market gyrations.
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